The percentage of older Americans declaring bankruptcy is increasing faster than any other group. Debtors 65 and older are having a hard time bearing the burden of credit card debt and medical bills.
A recent University of Michigan Law School report on elder bankruptcy filings shows that older Americans owe 50 percent more credit card debt that younger Americans. In response to the university's questionnaire, the elder debtors cited credit cards as a reason for bankruptcy more often than younger debtors. The fees and interest rates on the credit cards were particularly troublesome.
The report examines the reasons why elderly borrowers who find themselves struggling financially rely on credit cards. The report discusses that debtors could be financially naïve, that they may enjoy the privacy of credit cards, or that they may be trapped by isolation.
Clearly, the reasons for some elderly debtors' reliance on credit cards are unknown. But the impact of such reliance is revealing itself in the increasing numbers of elderly debtors who declare bankruptcy.
Many of our elderly clients are forced into bankruptcy because they are on a fixed income and have no realistic potential of increasing the amount that they earn. This fixed income combined with high interest rates on credit cards cause them to have to file bankruptcy.
Statistics Comparing Older and Younger Bankruptcy Filers
One option for debtors who owe high credit card balances is to negotiate with creditors. Older people who declare bankruptcy, however, seldom use this tool. In the Michigan survey, thirty-seven percent of elder borrowers reported using renegotiation tactics, compared to 60 percent of those under age 65.
Interestingly, older and younger debtors had similar emotional responses to declaring bankruptcy. About half of each group was very embarrassed, and about half was very scared.
Elderly debtors are much less likely to ask family for help while they are facing financial troubles. Approximately 35 percent of older borrowers asked family for assistance, but more than 68 percent of younger borrowers asked.
While older debtors had lower incomes than younger debtors, their debt load was about the same. This means that older debtors possessed less ability to repay their debts. In addition, older debtors may have less ability to find or continue work.
Elder Debtors Face Difficulties, Find Solutions
AARP states that states that, from 1991 to 2007, bankruptcy filings increased 150 percent for people 65 and over.
Before they consider bankruptcy, elder debtors may want to look at the alternatives.
If bankruptcy appears to be the best alternative, individual debtors generally have two choices:
- Chapter 7 bankruptcy eliminates most consumer debt, but nonexempt property must be liquidated.
- Chapter 13 bankruptcy restructures debt, typically allowing the debtor to prevent foreclosure and repay debts over a three-to-five-year period.
Consult an Attorney
If you are over 65 and considering bankruptcy, speaking with an experienced New Jersey bankruptcy attorney is a positive first step. A bankruptcy lawyer will explain your options clearly and guide you through the legal process.
